New Delhi: A panel led by Prime Minister Manmohan Singh will consider freeing up $16 billion of oil and gas projects stuck in the country’s red tape, overriding the defence ministry’s objections, two officials with direct knowledge of the matter said.

The cabinet committee on investment, meeting on Wednesday for the first time after it was formed last month, may unlock 40 oil and natural gas blocks, the two officials said, asking not to be identified before a decision. The drilling areas include the KG-D6 block operated jointly by Reliance Industries Ltd. (RIL) and BP Plc that holds the nation’s biggest gas deposit, the people with knowledge of the matter said.

The blocks were awarded to companies including Santos Ltd. and BG Group Plc in auctions that started in 1999 when India allowed non-state and foreign companies to explore and produce oil and gas from the nation’s fields to help raise output and cut a growing import bill. The ministry of defence withdrew approvals for 39 blocks, citing strategic and security reasons, while the commerce ministry denied clearance to the remaining one project.

Explorers have spent $13.4 billion on the 40 blocks till 31 March and another $2.5 billion is likely to be invested in the next three to four years, they said.

The panel is part of Singh’s efforts to boost spending as he seeks $1 trillion of investments in highways, ports and power plants from 2012 to 2017 to spur development in the country, where the World Bank says more than two-thirds of people live on less than $2 a day. Singh is seeking to speed up approvals of infrastructure projects and ease bottlenecks that impede growth and spur inflation.

Output Slump

RIL, controlled by billionaire Mukesh Ambani, is struggling to reverse a slump in gas production from the KG-D6 block in the Bay of Bengal. Output has more than halved in two years. The Mumbai-based company says the field is more difficult to produce from than they initially thought. RIL’s spokesman Tushar Pania declined to comment.

The explorer sold stakes in KG-D6 and 20 other blocks to BP, Europe’s second-biggest oil producer by market value, in August 2011. The ministry of defence withdrew approvals for exploration in 16 of these blocks, according to the people with knowledge of the matter.

State-owned Oil & Natural Gas Corp. (ONGC), the country’s biggest energy explorer, has had approvals withdrawn for 21 blocks, according to the people with knowledge of the matter. Chairman Sudhir Vasudeva didn’t answer two calls to his mobile phone. Two blocks Santos won off the coast of Orissa in east India in 2007 are also awaiting approval, the officials said. Bloomberg